With interest rates on fixed deposits (FDs) declining following the 1% repo rate by the Reserve Bank of India (RBI) since February, the Senior Citizen Savings Scheme (SCSS), which is backed by the Government of India, stands out as a good alternative, as it is risk-free and offers higher interest income and tax benefits under 80C, making it suitable especially for senior citizens seeking stable returns.

The government of India revises the interest rate on SCSS along with other small savings schemes every quarter. Recently, it announced the interest rates on SCSS applicable for the July-September quarter of FY 2025-26.
According to the government's announcement, there were no changes in the interest rates for small savings schemes like Public Provident Fund (PPF), National Savings Scheme (NSC), Senior Citizen Savings Scheme (SCSS), and others.

Also read: Has Govt cut PPF, NSC interest rate after RBI repo rate cut of 1%? Check the latest interest rate of post office schemes announced today

"The rates of interest on various small savings schemes for the second quarter of FY 2025-26, starting from 1st July 2025 and ending on 30th September 2025, shall remain unchanged from those notified for the first quarter (1st April 2025 to 30th June 2025) of FY 2025-26," the Ministry of Finance said in a circular on June 30, 2025.

SCSS offers a quarterly interest payout at an annual rate of 8.2%, whereas FD interest can be either cumulative (paid at maturity) or periodic (monthly/quarterly/half-yearly/yearly depending on the bank's terms). However, it should be noted that very few banks offer interest rates on fixed deposits above 8%, with the exception of a few small finance banks.

Karur Vysya Bank provides 7.25% interest to senior citizens, and Indian Overseas Bank gives 7.45%. Punjab & Sind Bank offers 7.55% to senior citizens, while Federal Bank provides 7.35% interest on FDs with a 444-day tenure.

Axis Bank offers the highest FD interest rate of 7.25% to senior citizens on 5 years to 10 years tenure. HDFC Bank offers 7.1% on 18 months to less than 21 months tenure, while ICICI Bank offers 7.10% on 2 years 1 day to 10 years. YES Bank offers an FD interest rate of 7.85% on a tenure of 3 years to less than 5 years.

The tenure of SCSS investment is 5 years (extendable for 3 more years). It qualifies for a tax deduction under Section 80C (up to Rs 1.5 lakh investment). There is a maximum investment limit of Rs 30 lakh.

The account matures after 5 years and can be closed by submitting the prescribed application form with the passbook at the post office.
In case of death of account holder before maturity of the account
Upon the account holder's death, the deposit will earn PO Savings Account interest from the date of death. However, if the spouse is a joint holder or sole nominee, they may continue the account at the SCSS rate of interest until maturity, provided they meet SCSS eligibility requirements.